VA Benefits: VA Loan Eligibility & Requirements

One of the VA Benefits offered to active duty and retired personel is the use of VA Loans to purchase or refinance a home.

Whether you are a First Time Home Buyer, a current home owner looking to buy your next home or refinance your current VA loan using VA financing, deciphering the current loan VA loan requirements can be overwhelming.

Bankruptcy (Chapter 7)- Generally the requirement is 2 years from discharge date. It is possible to qualify for a mortgage in less than 2 years if the bankruptcy was filed due to circumstances outside of your control (example: unemployment, medical bills not covered by insurance. Divorce is NOT considered to be outside of an applicant’s control

Bankruptcy (Chapter 13)- If all payments have been made and the bankruptcy has been discharged, the applicant is eligible to apply for a mortgage. If the bankruptcy has NOT been discharged, the applicant must show proof of making at least 12 payments and must obtain approval from the court to apply for the loan

Foreclosure/Short Sale- Same as Chapter 7 Bankruptcy. If foreclosure was on a VA loan, you might not have full entitlement which would then require a down payment

Genera lRequirements for VA Loans –Employment/Income

A minimum 2 year history must be verified. If active duty, less time is acceptable as long as the minimum service requirement for eligibility has been met. A Verification of Employment will be obtained by your lender for each employer listed

Employment must be verified as being in the same industry/field. If you recently graduated from school and have a job in which you don’t have a full 2 years experience, verification of schooling could satisfy this requirement

Retirement, Disability, alimony and child support income does not require a 2 year history but verification that it will continue for at least 3 years is required in order for it to be included

Income must be shown to be stable and likely to continue. When attempting to use overtime, bonuses, part-time employment etc, a 24 month history is generally required. You will need to provide current pay stubs, 2 years of W-2’s and 2 years of Federal Tax returns

General Requirements for VA Loans – Assets

You must have sufficient cash to cover any closing costs or fees not paid by the seller

VA does not require additional cash to cover a certain number or mortgage payments or unplanned expenses (cash reserves), however, your ability to accumulate liquid assets and the amount of assets currently available is taken into consideration int he overall credit worthiness analysis.

You will need to provide 2 months of current bank statements to verify your current assets.

General Requiremens for VA Loans -Debt to Income Ratio

The rule of thumb is this : All monthly obligations (car payments, credit cards, student loans, alimony, child support etc) and newestimated mortgage payment should not exceed 50% of the usable, gross monthly income. However, higher percentages can be approved.

Excellent credit history, good employment history, good cash reserves, little to no increase in housing payment are compensating factors that will be considering when allowing higher debt to income ratios.

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